News and Press Releases

Local Men Sentenced to Prison for Selling Fraudulent Gas Drilling Rights

FOR IMMEDIATE RELEASE
January 31, 2014

PITTSBURGH - Two Western Pennsylvania residents have been sentenced in federal court on their convictions of mail fraud, United States Attorney David J. Hickton announced today.

United States District Judge Arthur J. Schwab imposed a sentence of 40 months in prison and three years supervised release on Derek A. Candelore, aka Dan Kun and Kevin Kelly, 34, of Jeannette, PA 15644, and a sentence of 20 months in prison and two years supervised release on William J. Ray, 30, of Verona, PA 15147. The court ordered restitution for both defendants totaling $2.4 million.

According to the information presented to the court, Candelore and Ray were employed by Penn-Star Energy, LLC of Butler County (hereinafter Penn-Star), as landmen. A landman contacts mineral rights owners on behalf of natural gas production companies to arrange for leases of mineral interests for oil and gas production. Penn-Star acquired mineral rights on behalf of Range Resources Corporation. The mineral rights for four separate blocks of land in Washington County consisting of one hundred or more acres were stolen by Candelore and Ray using forged signatures, fake companies and forged notary signatures and stamps. These frauds began in February 2011 and ended in June 2012. During the scheme Candelore and Ray set up several post office boxes and bank accounts in the names of companies they created. They arranged for deeds and other documents to be filed at the Washington County Recorder of Deeds Offices to make it appear that the true mineral rights owners had transferred their mineral rights to the fake companies they had created. These deeds had forged signatures of several true owners and forged notary signatures and stamps. After they acquired what appeared to be ownership of the mineral rights, the fake companies owned by Candelore and Ray leased and/or sold the mineral rights to innocent and unsuspecting purchasers including local investors, out-of-state investment groups and Range Resources. Candelore exclusively ran two of the schemes and participated in the other two while Ray’s participation was limited to two of the four schemes. In the two schemes that Candelore and Ray did together, they split the money. The total loss to investors of investors was $2,400,144.77. Candelore pocketed $1,856,998.27, and Ray pocketed $543,146.50. The scheme began to unravel when one of the mineral rights owners hired an attorney to sell the mineral rights. The attorney discovered that one of the fake companies, Clark Lumber Company, owned the mineral rights by reason of a deed that bore the forged signature of the true owner.

Assistant United States Attorney Nelson P. Cohen prosecuted these cases on behalf of the government.

U.S. Attorney Hickton commended the U.S. Postal Inspection Service for the investigation leading to the successful prosecution of Candelore and Ray.

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